Conrail Intermodal Train on the Chicago Line

Conrail GP40-2 No. 3396 leads an intermodal train through Danbury, Ohio, in July 1987 on the Chicago Line.

Photograph by Robert Farkas

Trucking Firm Seeing Intermodal Improvements

Trucking company J.B. Hunt said this week it has seen improvements in railroad intermodal service during the third quarter.

As reported by Trains magazine on its website, Hunt’s CEO, John Roberts, said during a third-quarter earnings call that rail service has improved in terms of velocity and reliability.

The report noted that as recently as August J.B. Hunt executives were saying that rail service had deteriorated to the point where trains were regularly arriving a day or two behind schedule.

But this week Hunt said BNSF and Norfolk Southern in particular are showing improvements.

“While we are not back to where we need to be, I am pleased to say that we saw a meaningful improvement in velocity and performance from BNSF as the quarter progressed, but in particular in mid-August and throughout the remainder of the quarter,” said J.B. Field, president of intermodal for Hunt.

Flying Along

Baltimore & Ohio GP30 No. 4238 and Chesapeake & Ohio GP40 No. 4099 lead a westbound trailer train on Sept. 29, 1983, in Barberton. At one time these trains were called “Jet” because of their speed.

Photograph by Robert Farkas

NS Announces Launch of New Intermodal Service

Norfolk Southern said it has teamed up with Union Pacific, the Port of Virginia and shipping company Hapag-Lloyd to offer a new transcontinental intermodal service.

The service actually began in April but was formally announced on Wednesday.

Containers are unloaded at the Norfolk International Terminal and moved by NS to Chicago.

From there UP forwards them to ports in California in Los Angeles, Long Beach and Oakland; and to Seattle.

It is being marketed as OceaNS Bridge Express. The containers arrive weekly in Norfolk on ships operated by Hapag-Lloyd as part of its weekly Mediterranean Gulf Coast Express.

The port call rotation is Livorno – Genoa – Barcelona – Valencia – Veracruz – Altamira – Houston – Port of Virginia – Livorno.

Eight Panamax vessels are being used in the service and will call at the ports in Europe, Mexico and the United States.

Officials with the Port of Virginia said their agency is investing $1.3 billion through 2025 to create more rail capacity; modernize and renovate two berths and convert them to an RMG (rail-mounted gantry) operation; [and] dredge our channels to 55 feet deep and widen them for two-way traffic of ultra-large container vessels.

Oberman Continues to Assert Himself

Martin Oberman was at it again last week. This time he was prodding Class 1 railroads to provide more information about congestion at intermodal terminals.

The chairman of the U.S. Surface Transportation Board was acting after some railroads embargoed containers in an effort to clear out backlogs in intermodal terminals on the West Coast and in the nation’s heartland.

The temporary embargoes in particular were affecting international shipments. Containers are stacking up faster at terminals than railroads can move them and customers can receive them.

“I am particularly concerned about significant increases in container congestion at key U.S. terminals, and substantial charges being levied by the railroads for container storage at these terminals,” Oberman wrote in letter to the CEOs of North American Class 1 carriers.

Industry observers have said the supply chain congestion has been triggered by strong consumer demand that has led retailers to seek to restock their warehouses and store shelves.

Other factors are labor shortages and COVID 19-related protocols

Shippers have been slow to return containers to intermodal terminals, which resulted in a chassis supply shortage and diminished drayage capacity.

For their part, the Class 1 railroads contend that the intermodal congestion is not their fault because it has been caused by matters that are largely been beyond their control.

Railroads argue they are working with ports, steamship lines, shippers, and drayage companies to ease congestion.

Yet shippers point fingers back at railroads, saying they are charging excessive demurrage fees for containers stuck in intermodal terminals.

Oberman cited the latter charge in his letter to the railroad chiefs.

“The Board has received numerous reports related to the length of time that containers are being held in rail yards, and the sizeable storage fees (“demurrage”) some customers have been required to pay in order to obtain release of containers bearing their shipments,” he wrote. “These reports have come from shippers, both large and small, in addition to third-party logistics providers. I am particularly troubled about reports that Class I railroads are continuing to impose these charges even in circumstances when the receivers, as a practical matter, have no means to facilitate the release of their containers. Under these circumstances, demurrage fails to provide any constructive incentives, and perversely results in massive charges that can exceed the commercial value of the shipment.”

The STB head wants railroads to provide information on their demurrage policies, whether receivers are permitted to use their own chassis to retrieve their boxes, a description of any efforts made to reduce storage charges when the delay is beyond a shipper’s control, and the average daily volume of stored containers.

The STB’s authority over intermodal is limited due to exemptions that prevent regulators from seeking to apply its  demurrage policies and rules would apply to containers and trailers.

Some shippers are pressuring the STB to lift those exemptions, although Oberman underscored in his letter that the STB is not seeking at this time to do that. Nor did Oberman threaten to do that, at least not just yet.

“Because I recognize the significance of any such potential Board action, I am requesting the above information to facilitate careful consideration of this difficult situation and to assist the Board in determining whether any action may be warranted.”

In response the Association of American Railroads issued its own letter warning Oberman and regulators to stay out of the matter.

“​​Railroads are engaging with their customers, supply chain partners, and other stakeholders to do their part to meet demand to support the recovery of the national economy,” AAR attorney Timothy Stafford wrote.

“Particularly at this critical time in the nation’s recovery, regulatory action by the STB that interfered with that effort or that hindered railroads’ ability to serve their customers could be very damaging.”

Earlier this month, Oberman spoke out about what he termed questions about whether railroads are shirking their common carrier obligations under pressure from Wall Street investors seeking higher railroad industry profits and stock prices.

Oberman has also said regulators will take a look at such matters as reciprocal switching, lifting exemptions on the regulation of certain commodities, and ways to more easily settle rate disputes.

None of those probes is likely to please the AAR and its members. Yet an analysis published on the website of Trains magazine last week suggested that the STB interest in taking a more hands-on approach to regulation may be a consequence of what railroads have been doing in the past several years in the wake of their adoption of the precision scheduled railroading operating model.

After switching to PSR, carriers have reduced service, ceased pursuing or carrying certain types of traffic, and emphasized traffic that provides higher profits.

The Trains analysis cited a warning cited in January 2019 by former BNSF Executive Chairman Matt Rose warned that Class I railroads were courting regulatory risk.

“We have this common-carrier obligation to provide freight service to all customers in all markets,” Rose said. “And what we’re doing in PSR is we’re redefining what we’re willing to accept in the freight railroad industry on certain lanes. And I really do believe we’re going to get in a lot of trouble by doing that.”

“When you start redefining markets I think then the federal policymakers will look at this, and quite frankly, they will not be happy with us,” he said.

Oberman has signaled on multiple occasions that he intends to do just that. He recognizes that doing so will invite railroad industry resistance.

“I am frequently reminded by my friends in the railroad industry that we should butt out and the market should regulate rates and service. And I agree. I think the market should regulate rates and service,” Oberman said. “But . . . for that to happen there has to be a market. And so to me, it is far better if we have more competition in the shipping and freight industry so we don’t have to get involved.”

Aside from such issues as reciprocal switching, which allows captive shippers to seek access to another nearby railroad via interchange, the more activist approach espoused by Oberman may affect how regulators view the CSX acquisition of Pan Am Railways and the efforts of Canadian National to acquire Kansas City Southern.

Some of the increased attention being paid to railroad operations can be tied to a change of administrations in Washington, but even before that the STB had begun giving transactions more scrutiny.

An example of that were the conditions regulators imposed on the sale by CSX to CN of the former’s line from Syracuse, New York, to Montreal.

The STB approved the sale, but imposed conditions that both class 1 carriers found unacceptable. The sale has yet to be consummated.

In that case, the STB sought to require short line railroad connections with CN that CSX opposed.

It remains to be seen how far Oberman and his fellow regulators will go with their renewed interest in being more active.

Regulators may approve the CN-KCS merger and the CSX acquisition of Pan Am, but with strings attached that the parties might not like.

Looming in the background is the political balance of power at the federal level. It currently favors a more activist approach to regulation but that could change if control of Congress changes hands in the 2022 elections.

The Trains analysis concluded by saying that Oberman’s comments should serve as a wakeup call that there’s a new sheriff in town.

For now that sheriff is more interested in asking questions and raising concerns about issues that railroads would prefer regulators stay away from. But the carriers ultimately have little choice for now but to endure what Oberman and others are dishing out and work with it.

Some See TOFC Fading Away

For decades, trailers on flatcars have been a staple of U.S. freight trains. But over time TOFC has lost ground to doubled-stacker containers in well cars.

now some industry observers believe the endgame for TOFC will soon be at hand.

In an analysis published on the website of Trains magazine, intermodal analyst Larry Gross predicted TOFC will vanish within the next four years.

The long range implication for intermodal service is that railroads will no longer be able to serve as a plan B for shippers when trucking companies encounter driver shortages or when parcel shippers need extra capacity for peak volumes during holiday shipping seasons.

Intermodal traffic will become even more of a niche product for railroads than it already is.

Already, Gross noted, TOFC is gone in Mexico and Canada. In the United States TOFC accounts for just 8.5 percent of intermodal traffic.

As recently as 1988 TOFC was 60 percent of U.S. intermodal traffic.

TOFC has ebbed and flowed over the years and in the first quarter of 2021 TOFC traffic grew 26 percent, driven in part by an increase in parcel traffic triggered by explosive growth of e-commerce.

Gross, though, said traditional TOFC users are expanding their container fleets. For their part, railroads have encouraged the switch to containers by ending TOFC service on specific routes and terminals.

Railroads have also widened the rate differential between trailers and containers in another move to encourage the use of containers over trailers.

Not surprisingly, the move to precision scheduled railroading by most Class 1 railroads also has played a role.

Carriers prefer double-stacked containers because stack trains can carry twice the volume of a TOFC train of the same length.

Paring the number of trains on the road has been a major objective of U.S. railroads that have made the change to PSR.

Other reasons that railroads give for wanting to be rid of TOFC include the facts that trailers take up capacity in terminals, require separate lifting equipment, and must be placed on the few remaining TOFC cars maintained by TTX Corporation.

Yet from a shipper standpoint, containers are not always ideal.

Containers must ride on a chassis and shortages of those is a perennial problem for shippers.

Shippers also say that in some instances a container is not the best tool to move goods.

Gross projects that about half of current rail TOFC traffic will be converted to containers and the rest will move via highway rather than rail.

Shippers most likely to switch to containers are long-haul movers using 53-foot trailers, Gross said.

Business that is likely to be lost to the highway includes that which moves in 28-foot trailers favored by parcel shippers, such as UPS and FedEx, and shippers sending small lots of goods from origin to destination without a sorting move en route.

Gross said a few trailer-oriented services will continue to survive awhile longer, including Norfolk Southern’s Triple Crown RoadRailer service between Detroit and Kansas City.

The RoadRailers are likely to continue operating until the equipment wear out, Gross said.

TOFC has a long history dating to the former Chicago Great Western starting the service by loading trailers on flatcars in 1936.

At various times, railroads have sought to encourage the growth of intermodal business through innovation. RoadRailers are one such example.

There will continue to be intermodal trains and some of those trains will continue to receive expedited handling by dispatchers because shippers are paying extra for premium service.

But those trains will feature solid containers rather than the string of UPS trailers that have come to symbolize a railroad’s hottest trains.

B&O in Warwick in 1983

Baltimore & Ohio GP40 No. 4023 is westbound with an intermodal train in Warwick in September 1983. 

Photograph by Robert Farkas

Quite a Penn Central Collection

Let’s see what we’ve got here. There is E8A No. 4294, E8A No. 4070, E7B No. 4104, E7B No. 4107 and GE U25B No. 2658. They are teamed up to the westbound westbound Penn Central train Mail 9″in Canton on Sept. 10, 1972.

Photograph by Robert Farkas

Trailers in Downtown Akron

A Baltimore & Ohio intermodal train heads eastbound is in Akron in the late 1960s/early 1970s. The silos in the background belong to Quaker Oats, later to become Quaker Square.

Photograph by Robert Farkas

Schneider to Double Intermodal Use

A string of pumpkin-colored Schneider National containers brings  up the rear of the Q015 near Kent on CSX.

Schneider National plans to double its intermodal operations by 2020.

Known for its orange-colored trailers and containers, the intermodal, logistics, and trucking firm said the move to increased intermodal operations is part of an effort to reduce carbon emissions by an additional 700 million pounds per year.

The company said it is committed to cutting carbon emissions by 7.5 percent per mile by 2025 and 60 percent per mile by 2035, and to achieve net zero status for all company-owned facilities by 2035.

Some of its truck fleet will be switched to electric power as part of the initiative.

Headquartered in Green Bay Wisconsin, Schneider recently observed its 30^th anniversary of intermodal operations.

It maintains 45 ramps, 22,300 containers, and 20,600 intermodal chassis.